People who observe the history of Portland say that it is the land of small things: tiny firms, quirky start-up businesses, a compact city, small landholdings, microbrews. As higher education goes, Portland has historically been a bit undersized, too. While cities like Minneapolis or Austin have huge flagship universities in or just outside their urban cores, driving culture and commerce there, Portland for many years merely had a commuter college: Portland State University.

But in recent years, Portland State's profile has been on the rise—and that ascent is intimately tied to the hip, green city it has helped create. "As PSU goes, so goes the city," says Sam Adams, who was mayor of Portland from 2009 to 2012 and who has been a booster for the university. Despite the presence of Nike, Intel, and some other recognizable corporate powerhouses, Portland does not have the economic robustness of, say, Seattle to the north or the San Francisco Bay Area to the south. Local officials say that the university must play a vital role in launching businesses and producing more Oregon-grown graduates to work at those companies.

"There is a mutual need between the city and PSU, that neither one of us is so big that we can go it alone," Mr. Adams says.

At nearly 30,000 students, Portland State has grown to become the largest public university in Oregon, yet because of limited resources in the state, its growth has been marked by partnerships—with the city and county, major local businesses, the local school system, the Oregon Health & Science University, and, in an area where bikes and rails rule, the local transit agencies.

For example, one of the latest deals involving several of those entities is a tax-increment-financing arrangement that will yield $169-million to redevelop some dilapidated and underutilized blocks in Portland State's neighborhood over the next few decades. While the university gets some new and renovated buildings out of the deal, the city sees it as opportunity for more development and jobs to serve an institution expected to grow to 50,000 students by 2035.

City officials are also excited about another partnership down by the Willamette River: Portland State is working with the Oregon Health & Science University on a 500,000-square-foot building—the largest academic structure in the state—that will house various programs that the two public institutions are working on together.

"Most colleges that are located in their cities are going to be involved in a project with the city from time to time, but we are trying to lift these things to a more structured nature," says Wim Wiewel, president of Portland State. Mr. Wiewel, a Dutch sociologist with an easygoing charm in front of crowds, has played a big part in PSU's rising profile, local officials say. But he seems to have been built for the post: His academic career focused on the relationship between cities and universities.

From the Margins

Portland State's current relationship with the city goes back to the 1980s, when Oregon was struggling economically and policy makers created a commission to figure out what to do with this commuter college, which had been started for veterans right after World War II. "PSU has always been on the margins of Oregon's higher-ed trajectory," says Ethan Seltzer, a longtime professor of urban studies and planning at the university.

While PSU did not have the prestige of Oregon State University or the University of Oregon, it also did not have the expectations and baggage of the flagships.

"There is a really interesting aspect of that, because innovation happens at the margins," Mr. Seltzer says.

The commission and Portland State's leadership—notably Judith Ramaley, who was president from 1990 to 1997—landed on the notion of giving the institution an "urban mission," he says. Under her administration, the university came up with a new curriculum, in which students had to grapple with real-world issues in Portland—an educational mission that followed the university's new motto: "Let Knowledge Serve the City."

But there were already precedents for PSU's role in shaping Portland. For example, Oregon's well-known urban growth boundaries—which prevent Oregon cities from sprawling and make mass transit and bicycling more effective here—were in part designed in the 1970s by Nohad Toulan, an urban planner who founded PSU's College of Urban & Public Affairs. (Tragically, Mr. Toulan and his wife were killed in a car accident in Uruguay late last month; in a tribute, the Portland Oregonian called him "a major force in the development of Portland and Portland State.")

Today, the Urban Center, which houses the College of Urban & Public Affairs, anchors one corner of PSU's "Urban Plaza," a public space on campus that exemplifies the connections between the city and the university. A rail line runs through the middle of the plaza, which is the city's busiest transit hub. It's often a showcase for new innovations and products; in late summer, it was the site of a launch party for GlobeSherpa, a mobile ticketing app for the rail system that got its start at Portland State.

On the other side of the plaza sits the student recreation center; built in collaboration with the city and the state, it contains the city archives and various businesses in addition to university offices and athletic facilities. On a street jutting out from the plaza, the university has installed "Electric Avenue," another partnership—this time with the city and Portland General Electric—to test half-a-dozen electric-car charging stations, and to educate students and the public about electric cars.

The Urban Center, built in 2000, was itself a feat of collaboration: "The whole thing was pieced together from 13 different funding sources, and if any one of which had disappeared, the whole project would have collapsed," Mr. Seltzer says. One of the key sources was money the legislature had initially set aside for wildland firefighting. "If we had had a bad fire year, the building wouldn't have been built."

Clearly, this kind of collaboration might make resources go farther in many cases, but it can derail some projects. The Oregon Sustainability Center is a case in point. Planned to be one of the greenest buildings in the world, the $62-million center would have sat on the Portland State campus, and its tenants would have included local nonprofits, businesses, and university offices. Mayor Adams championed the center, but the state legislature killed the project when it blocked the funding.

Regional Strengths

Lately, local economic-development advocates have asked for more from PSU: They want the university to play a greater role in generating jobs and exports for Portland, and for Oregon. State revenues are somewhat constricted: Oregon has no sales tax and limited property taxes, so it relies heavily on income taxes. In 2011, the Portland Business Alliance, the local chamber of commerce, released a study showing that while Portland might compare itself culturally to Denver, Minneapolis, and Seattle, it lags far behind those cities in per capita income. Economically, Portland may be more like Cincinnati, Sacramento, and St. Louis.

Still, Portland has benefited from its image as a fashionable city: According to research by Greg Schrock and Jason Jurjevich, two urban-studies scholars at Portland State, Portland has been one of the top cities attracting young, college-educated people for the past 30 years. But there might be something to the notion that Portland is a bit like the city depicted in the satirical television show Portlandia, "where young people go to retire." Their research shows that young, college-educated folks in Portland have the highest rates of unemployment of all major metro areas in the nation, and they tend to be underemployed or working in "non-college occupations," like food service.

But only 32 percent of the college graduates living in the area are from there, compared with an average of 46 percent for other metro areas. Portland has been attractive in part because it has been the least expensive big city on the West Coast. But the region is changing—Portland is becoming more expensive and more diverse. (Today, one in four grade-school students in Oregon is Hispanic.) So local officials are looking ahead with the hope that institutions like Portland State can produce more graduates. Even as the biggest institution in the state, the university is still "not big enough," says Lew Bowers, the central city manager at the Portland Development Commission, the city's economic-development agency.

"We import intellectual talent, and we have been damn lucky that we have been able to do it," he says. "The New York Times has been in love with Portland for years, and we are on the cutting edge, but these things turn and evolve, and you're in a safer position when you can develop your own talent."

Mr. Bowers and other economic-development officials say there is a big need for more graduates in science, technology, and math fields, and emphasis on developing people who can lead businesses. Mr. Bowers says that he also wants more targeted research, linked to various clusters that the city has identified as regional strengths, like athletic and outdoor apparel, software, advanced manufacturing, and sustainability technology, such as green-power components.

Erin Flynn, who left the Portland Development Commission two years ago to become Portland State's associate vice president for strategic partnerships, says PSU is "knitting together" strategies to respond to these demands. The university already has a deep relationship with Intel, with a pipeline of Portland State graduates going to work for the semiconductor manufacturer in Hillsboro, Ore. The university's business incubator is one of the most successful in the state at attracting angel investors, and there is a waiting list to get in. Student teams have also been working on export strategies for local businesses. In recent months, the university has opened programs that seem right at home in Portlandia—to train students to work in athletic and outdoor apparel, or in the craft-beer industry.

"There are universities that have more sophisticated programming than we do," Ms. Flynn concedes. "What we have is this connectivity to the community."